L'Oreal wants to know what African women want, then sell it to them
In a sparsely lit room inside a laboratory near Johannesburg, a young woman pores over single strands of hair, the ends of each fibre held, jewellery-like, in delicate copper tubes. A laser machine nearby draws a horizontal red line over the face of a motionless volunteer in a black T-shirt.
"African consumers don’t have today a great freedom to do what they want with their hair without pain, money and effort," said Alice Laurent, a French biochemist who built up the research centre from scratch after a five-year stint for L’Oreal in China. "I’d say that L’Oreal is quite a pioneer."
The world’s biggest maker of beauty products is hoping to capture a market that it estimates at 100-million middle-class consumers. Unlike Europe, Africa holds the promise of high growth: the number of middle-class African women who live in cities and work outside the home will continue to grow for years to come, and their average age is an alluring 24. The idea is to develop new hair products especially for them rather than offering brands developed for black consumers in the US, and thus giving L’Oreal an advantage over competitors such as Unilever and Avon.
Pointing at a study that is pinned on a wall detailing degrees of curliness in countries across sub-Saharan Africa, Laurent said her first priority was identifying habits and needs of African consumers, about whom there was little research.
The laboratory was part of the company’s plan to tap into new markets, said Deborah Aitken, a Bloomberg Intelligence analyst. L’Oreal sought to sustain growth by carefully chosen acquisitions and by going into emerging markets with long-term potential, Aitken said.
"Africa is a big market for key product categories like hair care, and to really capture that will help develop L’Oreal versus peers like Unilever," Aitken said.
Worldwide, L’Oreal has extended its lead in recent years by expanding its stable of luxury lines. High-end brands had fuelled expansion in North America, where like-for-like sales were up 6.3% in the fourth quarter of 2016, the company said in March. While its shares have slightly lagged behind the Stoxx 600 personal and household goods index over the past 12 months, L’Oreal expects to outperform the beauty market globally this year.
But in Nigeria and SA, the region’s two largest economies, L’Oreal’s sales in all beauty and personal care categories combined are trailing Unilever, Avon and P&G. And it faces strong competition from local brands, which, says L’Oreal, account for two-thirds of the African hair care market.
Most of the money African women spend on beauty products goes to hair care. Among popular brands that L’Oreal already sells across sub-Saharan Africa are the relatively pricey Garnier and the mass-market Dark & Lovely, whose purple-tinted bottles and jars are coveted from salons in Tanzania to shantytowns in Sierra Leone.
The beauty market in Africa is divided in two segments: local brands; and international brands. "African women will use both, and they’re also very good at customising their own pomades," Laurent said.
While L’Oreal says it considers sub-Saharan Africa "very promising", the company will not disclose sales forecasts or targets.
But sales data tell the story. The total value of sales of beauty and personal care products in SA and Nigeria rose to almost $5bn last year. Hair care was among the fastest-growing categories of products sold between 2010 and 2015, with the value of sales climbing 38% and 63% in SA and Nigeria in the period respectively, according to Euromonitor, which collects data for four countries in the region.
"The big manufacturers are realising that there’s a lot of future potential," said Thomas Verryn, research manager at Euromonitor International for sub-Saharan Africa. "They’re investing now to make increased sales in the long term."
African hair comes with a unique set of challenges: it is more fragile than Caucasian hair, it grows more slowly and it is more difficult to manage. Wigs aside, braiding was widely considered the most convenient style because they could stay in for several weeks and barely require maintenance, Laurent said. But years of braiding or chemically straightening curly hair could cause receding hairlines and even baldness, as some products, relaxers especially, are "very harsh to the hair", she said.
To be sure, the African hair care market is still tiny compared with Asia or Europe, accounting for about $450m in sales in SA and more than $300m in Nigeria, according to Euromonitor data. And like other big-name western brands, L’Oreal is facing the scepticism of a generation of media-savvy African women who have latched onto the natural-hair movement that originated in the US about a decade ago.
While US sales of relaxers dropped 19% between 2013 and 2015, market research company Mintel reports, in Africa they are still climbing steadily. At the same time, the natural-hair trend is rapidly gaining a foothold in Africa, with at least 10 specialised salons opening in Johannesburg alone in the past few years, each selling their own pomades.
Back in her office, Laurent brings out a sample of the first brand to come out of the lab: Au Naturale, a range of four products designed to untangle and moisturise African locks.
"We redeveloped the range specifically for Africa, we tested it here and we worked with our experts here," she said.